Saudi Arabia Business Forecast Report Q4 2012

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Continued heavy spending on the part of the government indicates its ongoing concerns about the need to shore up its key bases of support, given the persistent threat of public unrest. While we maintain that large-scale protests are unlikely to occur in Saudi Arabia, large youth unemployment coupled with a lack of political liberties mean that tensions will continue to linger. Saudi Arabias growth outlook remains broadly positive.

Leading indicator data show that the economy is firing on all cylinders, with high oil prices, heavy government spending and buoyant consumer confidence driving robust economic growth. With oil prices continuing to trade at historically high levels in the first half of the year, we see few risks to the countrys positive near-term outlook. Although balance of payments stability in Saudi Arabia is unlikely to come under any pressure in the foreseeable future, we expect the current account surplus to shrink substantially in the years ahead, falling from an estimated 28.5% of GDP in 2011 to 10.8% of GDP by 2016.

Key Risks To Outlook

A sharper-than-expected downturn in the global economy, if it was to translate into a substantial decline in oil prices, would pose significant downside risks to our forecasts for Saudi Arabias fiscal and current account position, though it remains highly unlikely that either account will fall into the red in the near term. We expect inflation to remain broadly subdued in 2012, on the back of moderating global energy prices and government subsidisation of food and fuel. However, we highlight that a prolonged period of robust growth, coupled with loose fiscal and monetary policy, poses a medium-term inflation risk, and could begin to spur more rapid price rises this year.

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Select License Type

£777.44

Electronic License

Electronic License

An electronic version (mostly PDF, but can be Excel or PPT), which is either available for immediate download or will be sent via email by the Publisher of the report. The licencing for an electronic version is for use by the purchaser ONLY.

Table of Contents

Executive SummaryCore ViewsKey Risks To Outlook

Chapter 1: Political OutlookSWOT AnalysisBMI Political Risk RatingsPolitical Risk AnalysisCrown Princes Death Highlights Succession RisksThe death of Crown Prince Nayef bin Abdulaziz al Saud on June 16 is unlikely to have a major impact on Saudi Arabias short-termpolitical risk profile, and the process of appointing his replacement has played out relatively smoothlyPOLITICAL OVERVIEWLong-Term Political OutlookScenarios For The Coming DecadeThe Saudi royal family depends on steady oil revenues to maintain its tight grip on the population As a result, a sustained downturn inglobal oil demand could lead to substantial unrest and, potentially, regime change over the long term

Chapter 2: Economic OutlookSWOT AnalysisBMI Economic Risk RatingsEconomic ActivityThe Economic Boom Goes OnRecently released leading indicator data have done nothing to dampen our positive outlook on the Saudi Arabian economy With fixedinvestment and government spending continuing to grow apace,TABLE: ECONOMIC ACTIVITYMonetary PolicySubsidies Reining In Inflationary PressureThe risk of a sharp rise in inflationary pressure in Saudi Arabia over the coming months is relatively minimal Despite a prolonged periodof expansionary fiscal and monetary policy, government subsidies have succeeded in keeping inflation broadly under control, and thegovernment has ample fiscal ammunition to continue subsidising consumer goods for the foreseeable futureTABLE: MONETARY POLICYEconomic PolicyMortgage Law: Initial ReactionsThe approval of Saudi Arabias first- ever mortgage law could be a watershed moment for the domestic real estate sector, and ifimplemented it would be a further boost for the already buoyant economyBanking SectorAsset Expansion To ModerateWe expect asset expansion in the Saudi Arabian commercial banking sector to cool in the months ahead Deposit growth is slowing onthe back of base effects from the implementation of the governments stimulus package in early 2011, while regulatory limits will restrictbanks ability to ramp up lending through borrowing

Chapter 3: 10-Year ForecastThe Saudi Arabian Economy To 2021Politics Main Risk To Long-Term OutlookAssuming the survival of the current form of government into the medium term, we see ongoing strong growth and asset accumulationvia real expansion in investment and exports, amid relatively high oil pricesTABLE: LONG-TERM MACROECONOMIC FORECASTS

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